To sell or not to sell - that is the question

[Joseph Shapiro]

Hey gang!

I have an apartment building in the northeast.  Bought it 5 years ago.  

Currently, cashflow is **** - $1,500/month but if I increase rents to the current market (probably a 2 - 3 year process) I can likely cashflow $4,000/month.  This accounts for a tax reassessment and refinancing the current mortgage balance (loan is comprised of two 5 year terms).
I have $600,000 in the building (between downpayment, capex, closing costs etc).

I have the opportunity to sell it right now and gross $1M or after taxes $700K (if I can't 1031).

Question: Would you sell or keep this property?

[Taylor L.]

So right now you're making 2.5% on the $700k that you could have access to. If you increase cash flow to $4k/mo, that bumps you up to 6.85% on that $700k. I'm using $700k rather than the million in order to run the calculation net of taxes, assuming you don't do the 1031.

2.5% is not a great return by my book. 6.85% isn't great either, but it's not awful if the property is totally passive. Neither of these calculations includes future appreciation, which would increase the return.

I would sell and look to reinvest in the sunbelt. If you can use the 1031, so much the better!